Quick-Service Restaurants Look For More Growth In 2012

While casual-dining restaurants continue to languish in the midst of the nation’s slow-motion economic recovery, quick-service chains have rebounded to pre-downturn levels, according to Goldman Sachs securities analysts.

According to a new report from Michael Kelter and Chris Cerrone, the gap in same-store sales performance between quick-service and casual-dining chains — with the exception of Darden Restaurants — has widened over the past few quarters.

“QSRs have recovered their pre-recession trajectory, while casual diners are hovering around 0-percent to 1-percent growth,” they wrote. “We do not see any catalysts that would change recent trends, as most economists expect the U.S. economy to continue to grow at a very modest rate in 2012, and casual dining is highly macrosensitive.”

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Chipotle, Dunkin’ poised for growth in near term

Kelter and Cerrone wrote they expect 1,200-unit Chipotle Mexican Grill to be the best-performing restaurant stock of 2012, saying they are bullish because the brand is very early in its growth lifecycle, with plenty of upside still possible for same-store sales and profit margins.

“We estimate the total potential units for Chipotle to be around 3,500, which means the company is only at around 30 percent of potential penetration today,” they wrote. “Based on the company’s current growth rate, Chipotle would not reach saturation until 2020 or beyond. Success internationally or with [its new brand] ShopHouse as a second concept would further extend the growth horizon.”

The analysts see “clear evidence of the concept’s appeal” in the fact that Chipotle has increased its market share within the fast-casual sector from 3 percent in 2000 to 16 percent in 2010, a period during which that industry segment tripled its annual sales from $4 billion to $12 billion.

They are projecting a 9-percent same-store sales increase for Chipotle in 2012, based on the impact of newer restaurants entering the comparable-sales base, a projected 4-percent gain in traffic, and the effect of about 5 percent in price increases taken in late 2011.

“There are no indications of a growth slowdown for Chipotle,” they said, noting that average unit volumes and return on invested capital continue to rise, and food cost inflation is expected to ease in the second half of the year — especially for avocados.